DPB3063: BUSINESS LAW

CHAPTER 4: AGENCY

4.1.2 CREATION OF AGENCY

LECTURER : MADAM FARDHILA SYAHIRA BINTI SALMI NORDIN

Students Name Matric Number
1) DIVIYAH A/P MANIKAM 23DLS18F2033
2) MOGENA SELVI A/P ANANDAN 23DLS18F2061
3) KAUSALYA A/P SANKARAN 23DLS18F2035
4) IZZAT DANIAL BIN MOHD SUKERI 23DLS18F2003
5) TANG MING FOO 23DLS18F2083
6) AIMAN DANIAL BIN AHMAD KHAIRI 23DLS18F2029
7) MUHAMAD HILMAN BIN AHMAD BISTAMAM 23DLS18F2005
 CREATION OF AGENCY
 S 183 CA “No consideration is necessary to
create an agency”
 Agency can be created through:

a) Direct Appointment

b) Implied appointment

c) Ratification

d) Necessity

e) Estoppel
 DIRECT APPOINTMENT
 Principal directly appoints a person to be his
agent.
 This can be done in 2 ways:

 oral

 in writing

 E.g: Ali, I want you to be my agent

 IMPLIED APPOINTMENT
 When a person by his words or conduct holds
out another person as having authority to act
for him.

 E.g: Ali always asks Siti to order for him, goods from Abu
When as having authority to act for him.

 Relationship between husband and wife

 Relationship between partners
 IMPLIED APPOINTMENT
 Relationship between husband and wife
 Agency relationship exists between husband and
wife
 The wife is an agent to her husband

 She is considered as having authority to buy

goods on credit using her husband’s name
 Husband will liable for the price of the goods
ordered.
 IMPLIED APPOINTMENT
 Relationship between husband and wife
 However, husband can deny his liability, if he can prove
that:
 He expressly forbid his wife to pledge his credit

 He expressly warned the tradesman not to supply his wife

with goods on credit.
 The wife was sufficiently provided with the goods

 The wife was given sufficiently allowance to buy goods

without pledging her husband credit.
 the order was unreasonable (not suitable to her living)
 RATIFICATION
 Section 149, if either one of the two situations happen, principal
has two choices (reject the contract or accept the contract).
When he accepts the contract, it is known as ‘ratification’.

 Ratification can happen if:

1. Agents who has been appointed but has exceeded his
authority when he entered into a contract with a third party.
2. A person who has no authority to act for the principal but he
acted as if he has the authority to enter into a contract with
third party.
 RATIFICATION
 Section 149, if either one of the two situations happer, principal has
two choices (reject the contract or accept the contract). When he
accepts the contract, it is known as ‘ratification’ (S. 150)

Case: Bolton Partners v Lambert (1889)

 Bolton Partners owned a factory, which Lambert offered to buy. This
offer was accepted by the managing director, though in fact he had
no authority to do this. On 13 January, there was a disagreement,
and Lambert withdrew his offer. On 17 January, Bolton Partners
started proceedings for breach of contract. On 28 January, the Board
of Directors of Bolton Partners ratified the actions of the managing
director. Lambert argued that this ratification came too late, but the
Court of Appeal held that it had retrospectively validated the original
contract, and that Lambert’s attempt to withdraw was therefore
ineffective.
 RATIFICATION
 Ratification of a contract can only be made under these conditions:
1. The act must be unauthorized by principal
2. The agent must act as an agent

Case: Keighley Maxted v Durant

Facts: An agent, Robert, was authorized by the plaintiff to buy
wheat at a certain price. The agent exceeded his authority
and bought at a higher price in his own name although it
was intended for Keighley. Keighley agreed to take the wheat
at that price but failed to take delivery. Durant brought an
action against Keighley.
Held: Keighley was not liable to Durant since Roberts at the time
of the contract did not profess to act as an agent.
 RATIFICATION
 Ratification of a contract can only be made under these
conditions:
3. The principle must have a capacity to enter into a contract

Case: Kelner v. Baxter (1866)

Facts:An agent made a contract to buy a hotel on behalf of a company.
At the moment of time the company had not been formed yet.
Held; The court held that the company cannot ratify the contract
because at that time it does not have the capacity to make a
contract.
Therefore, in this case, the agent was held liable.
 RATIFICATION
 Ratification of a contract can only be made under
these conditions:
4. The agent must have a principal who is in existence
5. The principal must have all the material facts regarding the
contracts when he ratifies it.
6. The principal must ratify the whole contract
7. Ratification must be made within a reasonable time

8. The ratification must not cause a third party to suffer any

damage.
 NECESSITY
 Section 142, a person may become an agent although he was not
appointed.
 Agency by necessity normally exist in a business.

Case: Great Northern Railway Co. v Swaffield (1874)

Facts: In this case, the defendant has put his horse on to the Plaintiff’s
train, to be sent to a destination which has been agreed by both
parties. Upon arrival at the destination, that there was not one
to take the horse.
That station master didn’t know the defendant’s address and
thus directed that the horse to be put in a stable. The railway
company later claimed from the defendant’s for the charges of
the stable.
Held: The court held that the Plaintiff has acted as an agent by
necessity in this situation.
 NECESSITY
Before an agency by necessity can be created 3 conditions must be
fulfilled:

1. It is impossible to get the principal’s instructions

Case: Springer v Great Western Railway Co.

Facts: Some tomatoes arrived late at a port because of a storm. The
railway company could not transport them to London immediately
because of a strike. The company decided to sell the tomatoes locally
before they became rotten.
Held: The court held that the railway company should pay the owner of
the tomatoes the difference in the price between the price obtained
locally and the(higher  )price which would have been obtained in
London.
The reason for this is that it was possible for the company to have
contacted the owner for instructions before selling the tomatoes locally
 NECESSITY
 Before an agency by necessity can be created 3
conditions must be fulfilled:

2. The agent action is necessary to prevent loss to the principal. This

happens when the principal put the agent to be in charge of the goods.
3. The agent has acted in good faith

o The elements of agency of necessity are :

There are be a situation of necessity;
The agent cannot obtain instructions from the principal;
The agent must act in good faith and in the interests of the principal;
The agent’s acts must be reasonable and prudent.
 ESTOPPEL
Definition: Estoppel is a legal principle that prevents
someone from arguing something or asserting a right that
contradicts what they previously said or agreed to by law. It is
meant to prevent people from being unjustly wronged by the
inconsistencies of another person's words or actions.
3 types of estoppel:
. Collateral estoppel
. Estoppel by deed
. Promissory estoppel